Microfinance Focus, July 31, 2009: MYC4, a peer-to-peer lending facility with 15,643 registered investors from 94 countries, has reported investments in online microfinance amounting to 9.3 million euros in 4,865 businesses in seven African countries so far. And the trend is catching up with other players in microfinance sphere.
Micro Place, an e-Bay company, has provided 40,005 loans enabled by investments made online since its inception in Sept. 2007. KIVA, another major US-based not-for-profit company which has pioneered the idea of online lending, is distributing one loan in every 14 seconds giving more than $1 million a week.
Kiva has explored the potential of internet to connect retail investors to microfinance borrowers and entrepreneurs across the world. This idea inspired many such initiatives across the globe — MYC4 in Africa, Micro-Place an E-bay venture, Rang De and Dhanna-X in India have all made the idea a successful turn.
Most of these online market places provide web platform to connect investors and entrepreneurs. Usually they put the profiles of micro–entrepreneurs, details of their current business activity and provide a choice to investors to select the entrepreneur. Investors can invest as low as $ 20.
These platforms also provide a choice to be just a social investor as KIVA does. It does not yield any returns to investors. But MICRO PLACE and MYC4 offer some return to the investors who use their platform. According to MYC4, the average interest rate for investors is 13.1% per year. These institutions select local MFIs and NGOs as their partners to select entrepreneurs, to distribute loans, collect repayment, to collect information and sometimes training or any other assistance.

Microfinance Focus, July 31, 2009: Professor Muhammad Yunus, founder and managing director of Grameen Bank, has been a great inspiration to the entire microfinance community. Microfinance Focus congratulates Dr Yunus and takes the opportunity to republish an exclusive interview that Dr. Yunus had given to it on March 30 on the sidelines of the Sa-Dhan’s National Microfinance Conference 2009 in New Delhi. It is a show piece of Dr yunus’s views on microfinance that will have an enduring impact on the community forever:
MF FOCUS: Microfinance is an established and recognised instrument to fight poverty today. Many people are confident and hope that poverty can be eliminated through it. Isn’t it too simple just to rely on microfinance?

Dr. Yunus: You don’t have to. Nobody is forcing you to do that. If somebody wants to do Microcredit, fine. I wouldn’t say this is something everybody should have. Nobody says it is the only solution. Human beings are very multi-dimensional. Microfinance is one of the many, many things.

MF FOCUS: Social business is an additional way. Do you identify enough potential for social business to make a real difference, globally?

Dr. Yunus: Yes of course. Definitely it is a global and not a local issue. There are two kinds of businesses: One is business to make money, the other business is to change the world. This one is with the intention of changing the world and not to have any personal gain from that. It is all dedicated to make a difference. It is addressing a social issue, to resolve it. You can do that.

MF FOCUS: What are the factors that make social businesses successful?

Dr. Yunus: A good business plan, good ideas and use the creativity in the most creative way.

MF FOCUS: Microfinance as well as Social businesses have to be highly efficient. How is it possible to maintain or re-introduce the social mission back into microfinance?

Dr. Yunus: Whenever something gets popular, actually catches attention, there are people who take advantage of that and misuse it. It happens in everything. When Big brands are popular, it gets imitated by fake ones. Same thing happens with microcredit. People name it microcredit but in fact it is not microcredit. It is something completely different.
People have to be made aware of what is microcredit and why it is important to stick to the real microcredit and not the one which has a different motivation. But while you are looking at the microcredit itself, even good people may have wrong ideas, which makes them shift away from the whole idea, the mission. We have to be very careful and remind ourselves, what is our mission. That is why we have meetings (Sa-dhan conference) like this, to rediscover your mission and then re-adjust your work to the mission.

MF FOCUS: To build an enabling environment for social entrepreneurs, what should governments do and what regulations do you
count as important?

Dr. Yunus: It is very important. Very Important! Regulation is very important but at the same time regulation can be stifling, destroy the whole business by over-regulating and making it impossible to function. It is like a mother and a child. You know how you have to change your child to do the right things. At the same time you should not control your children so that it loses all its initative. It is like becoming a prisoner in the hands of the mother. Regulation should be promotional, a Cheerleader. At the same time make sure you do the right thing, that you don’t drift away from the real principles. It is a tough job in the sense you have to balance both — how to encourage, and at the same time how to restrain.

MF FOCUS: Due to the financial and economic crisis, development funds were cut by the North (developed countries). Where do you see the responsibilty of rich countries in fighting poverty? Where should they act?

Dr. Yunus: See… the Southern countries didn’t create the crisis, they are the victims of the crisis.It is only one country
which created the crisis and it has spread all over. Those who were involved in creating this crisis also have a moral
responsibility to make sure that the victims are supported . There are lot of people sufferring, that has to be taken care of. Now they are busy of making bailout packages and all the support. And i am saying …At least 10 % of all bailout packages every where should be earmarkerd for victims in the Third World. These things have to be built in the system.

MF FOCUS: Apart from poverty there are many topics, which can be solved or bargained only at an international level, Climate
Change for example. Nicholas Stern is convinced, we have to solve both topics together: Poverty and Climate Change.

Dr. Yunus: Well, financial crisis is the latest crisis. 2008 had the food crisis, which is still there. Simply front pages have been taken over by financial crisis and have pushed away all discussion about the food crisis. 2008 was also the year of energy crisis -– the oil prices shot up to the sky. It didn’t disappear, it is lying low for a while. And also this is perpetuating environmental crisis. All these crises have their roots in the same thing.
These are not separate crises. You have to adjust the root causes than adjusting all of them. The root causes are the wrong structure, the capitalism structure that we have. We have to redesign the structure we are operating in, which is wrong and unsustainable lifestyle. We have to take the hard decision! We and each one of us must take a decision on this planet. And also we should inculcate among our children a simple way of living. We should not live in a way, that it harms another person. Once you take this decision, everything will be solved. We have no right to live a life which is harming anybody else. It is like traffic laws. You can’t have a car and knock everybody off the road. There’s a rule that you have to drive safely, so that you don’t harm anybody. Same thing is for living on this planet. We are sharing with each other.

MF FOCUS: Grameen Bank has moved to Grameen II methodology, but still Grameen replicators in India follow the Grameen I model. Do you think they should explore such flexible methodology?

Dr. Yunus: It is up to them, what they like… I cannot advise. We thought we can solve some of the problems. we see the opportunity that we have by relaxing our procedures and rules to make it more friendly.

MF FOCUS: What is the next level for Micro finance and how to take it forward?
Dr. Yunus: Next level is to enter into insurance, pension funds, second generation issues — young children are coming up… and we should try to make them into better citizens to deal with life.

MF FOCUS: Savings product is much needed by the poor. Regulation is cautious not to allow collection of savings by certain categories of MFIs. What is your opinion?

Dr. Yunus: Savings product is very important. Change the law!!! Keep on insisting that the system is right.

MF FOCUS: With Microfinance Focus, the monthly magazine, we are working on information exchange and trying to promote best
practices in the sector. How important are projects like Microfinance Focus for the sector?

Dr. Yunus: Yeah! This is a good initiative. Communicate… I mean… let people know what is happening, what is right, what is wrong, so they can participate in debate, discuss, make it more efficient, more cost effective and more friendly.

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(If you want to send a message on this occasion to Dr Yunus, please send email  Click we will pass them on to him )

By Naagesh Naaraayana

Microfinance Focus, July 31, 2009: Microfinance pioneer Professor Muhammad Yunus, founder and managing director of Grameen Bank, has been awarded the US Presidential Medal of Freedom for 2009.  Dr. Yunus will receive the medal from President Barack Obama at a special White House ceremony on August 12. Each (recipient) saw an imperfect world and set about improving it, often overcoming great obstacles along the way…Their relentless devotion to breaking down barriers and lifting up their fellow citizens sets a standard to which we all should strive,” said President Obama.  Dr Yunus has pioneered microfinance movement in Bangladesh which has now become a global phenomenon. Yunus was awarded a Nobel Peace Prize in 2006 for his work. In his congratulatory message, Mr Alex Counts, President & CEO of Grameen Foundation, said: “I worked with Dr. Yunus for six years in Bangladesh prior to establishing Grameen Foundation with his support in 1997, and I am delighted that he is being honored for his tremendous work on behalf of poor people worldwide.  While living there, I saw Professor Yunus’ humble leadership and pathbreaking ideas changing lives and motivating people at all levels of society to envision and work towards a poverty-free Bangladesh.”

The Presidential Medal of Freedom is the highest civilian honor in the United States and recognizes those who have made significant contributions to the United States, world peace and culture.
Dr. Yunus will join Nelson Mandela, Mother Theresa and Martin Luther King, Jr. when he receives the award on August 12. The US medal was established by President Harry S. Truman in 1945 to recognize civilians for their efforts during World War II and was reinstated by President John F. Kennedy in 1963 to honor distinguished service by civilians.

By Bilal Hussain in Srinagar

Microfinance Focus, July 30, 2009: Over the past two decades, unrest in Jammu and Kashmir has affected the valley people, especially the urban poor, either by displacing them from their livelihoods or leaving them without any. Their poverty levels are aggravating and seek an urgent but long-term solution. Although some organizations have started working for the development of the area, there is ample scope for microfinance institutions to help the urban poor.

According to a BPL survey of Jammu and Kashmir by the Directorate of Economics and Statistics (DES), over 2.21 lakh people fall under below urban poverty level in the state of Jammu and Kashmir. And in the district Srinagar alone, there are over 73,262 BPL population, according to DES mid-year estimates (2007-08).
The fact was that there are many organizations that are focusing on the rural parts of the state but somehow the urban areas are missing from their developmental plans. Whle the skilled ones manage to get employed anyhow, it was the large majority of the unskilled people who are forced to work in the unorganized sector. Many of them live in urban areas with low and unsustainable income.
Here, microfinance could play an important role in poverty alleviation. Since majority of the urban population who fall below the poverty line (BPL) have no access to basic financial services, there is always the need to create opportunities for city dwellers to augment their income and to assist them through soft and hassle-free loans.
Recently a news report in a local daily mentioned how the state has been diverting developmental funds to secure their vote banks in rural areas. It stated that under Indira Awas Yojana — the biggest housing scheme in the country aimed at providing shelter to homeless people living below the poverty line in rural areas — Rs. 25,500 in plain areas and Rs. 27,500 in hilly areas was given to beneficiaries under the previous government. The report also alleges that most of them were workers from different political parties.
Not many organizations in the valley, either local or international, appear to be keen to focus on the urban poor. There is an existing trend, especially among the NGOs, to view poverty as purely a rural problem. Very often urban regions are sidelined by them as more ‘developed’ spaces.
Over the years, Jammu and Kashmir has seen considerable increase in urban poverty. In Srinagar, majority of the people manage their livelihood solely depending on the service sector. But owing to many reasons, the latest of them being the global economic melt down, the service sector is providing far less opportunities and forcing many to shift to the primary sector (agriculture) for their economic survival. But they don’t have the resources either – particularly land – at their disposal. Finally, they continue struggling in the declining service sector.
Another visible trend in the valley is the increasing urbanization. With the rural population continuing to arrive in the city, it is putting strain on limited resources available and triggering the urban poverty further. As a result, there are many parts of the city – particularly in the downtown areas – where every second house suffers due to unemployment, under-employment and lack of resources. To substantiate their meagre income — which amounts to no more than US$1 a day — most of these households have retained their joint family structures.
Setting up a microfinance institution, which can focus on the urban poor and would identify the needy persons who have a positive bent of mind to work for themselves and for the society at large, will go a long way in helping alleviate urban poverty.
The other issue that needs to be highlighted is the gender aspect. This relates to improving the access and availability of basic amenities, and also addressing such external concerns like shelter space, transport and overall security level of the poor women, so as to enhance their standards of living and to facilitate their participation in the urban market.
This should not mean dividing the rural and urban populace, but of locating poverty beyond the conventional notions, in a wider framework. If such steps are not taken, there is a great possibility that this divide will increase and have serious repercussions in near future. To avoid such a situation the issue of urban poverty needs to be tackled seriously.

(Bilal Hussain is a journalist based in Srinagar. He can be reached at bilal4u2@gmail.com)

(Disclaimer: The views expressed in this article are of the author and do not necessarily reflect the views of Microfinance Focus.)

Microfinance Focus, July 30, 2009: The Asian Development Bank (ADB) will provide the six member-countries of the Coral Triangle Initiative (CTI) a $2.3-million technical assistance to strengthen coastal and marine ecosystems management.

“The project will promote regional cooperation on information exchange and decision making based on scientific and technical knowledge to ensure that the Coral Triangle will be managed in a coordinated and sustainable manner,” said Marilou Drilon, an economist of ADB’s Southeast Asia Department.

Often referred to as “the ” the Coral Triangle contains vast marine resources critical for the economic and food security of an estimated 120 million people. These resources are at immediate risk from a range of factors, including the impacts of climate change, over fishing, and unsustainable fishing methods.

ADB is actively assisting the CTI, whose members include Indonesia, Malaysia, Papua New Guinea, Philippines, Solomon Islands and Timor Leste. It oversees the 5.7-million-square-km expanse of ocean.

The Global Environment Facility (GEF) will provide a $1.2 million grant, to be administered by ADB, for the project. GEF aids projects on global environmental issues involving climate change, biodiversity, international waters, and ozone depletion.

ADB’s Regional Cooperation and Integration Fund under the Regional Cooperation and Integration Financing Partnership Facility will provide an additional $500,000 grant. The six member-countries will contribute $600,000 to complete project funding.

ADB’s Southeast Asia Department will take the lead in the project and work closely with ADB’s CTI Task Force. The lead environment agencies in each CTI country will assist in project implementation.

Microfinance Focus, July 30, 2009: CRISIL Ratings has assigned  ‘BBB-/Stable’ rating to the term loans of Ujjivan Financial Services Pvt. Ltd, a Bangalore based Microfinance institution, saying the outlook is stable.
CRISIL expects Ujjivan to improve its competitive position in the microfinance industry over the medium term, given its comfortable capital position, and benefits derived from its management’s experience in the financial services sector, said a press release.
Ujjivan Financial Services Pvt Limited is an NBFC since 2005 engaged in microfinance. It has 127 branches, with more than 295,000 customers and a portfolio outstanding  of Rs.1.7 billion, as of March 2009. In FYE2008-09, the company reported a loss after tax of Rs.6.7 million and a total income Rs.280.35 million.
CRISIL ratings are derived from the experience of its board of directors and senior management, and comfortable status of capital. These strengths are partially offset by Ujjivan’s modest earnings profile, geographic concentration of operations, and exposure to risks inherent in the microfinance industry, the report said.
Positive rating drivers include sustained growth in advances and profitability, without compromising on its asset quality. On the other hand, inability to sustain the improvement in its earnings profile, or steep deterioration in its asset quality, failure to raise adequate resources to fund its planned growth would constitute negative rating guidance.

Microfinance Focus, July 28, 2009: IFC, a member of the World Bank Group, will provide a microfinance package of $300,000 to Guyana’s Small Business Development Finance Trust Inc to help the company grow its client base of micro, small, and medium enterprises, said a press release on Monday.
IFC’s convertible financing of 60 million Guyana dollars ($300,000 equivalent) will allow SBDF to more than triple its client base and expand from 540 to 2,000 loans a year. IFC is also providing advisory services to SBDF to formalize its lending operations on a sustainable business model and become a regulated financial institution. The advisory project is supported by the Canadian International Development Agency (CIDA), a key donor partner to IFC Advisory Services in the English-speaking Caribbean countries.
“Our main objective is to strengthen the MSME sector through increased access to lending, technical support, and nontraditional financial facilities,” said Manjula Brijmohan, SBDF’s Managing Director. “IFC’s support will help us implement our vision for expanding our lending program, particularly to rural Guyana.”
SBDF provides financing and technical support for individuals without access to Guyana’s formal financial sector, including street vendors, small rice farmers, women, and shop owners.
Kirk Ifill, IFC representative for the English Caribbean, said: “IFC’s support to SBDF is part of our strategy to expand access to formal credit for low-income entrepreneurs in Guyana, a country where banking penetration remains under 30 percent. IFC’s integrated approach, providing financing and advisory services, aims to help SBDF become more sustainable in the long term. This partnership is key in our efforts to helping create opportunities for low-income people in Guyana.”
The High Commissioner of Canada to Guyana, Charles Court, noted: “In 2002, Canada, through the Canada Fund Support, helped SBDF to set up its office. This new Canadian contribution to SBDF will help foster the development of microfinance in Guyana.”
IFC is expanding operations in the Caribbean. As of July 2009, IFC’s committed portfolio in the Caribbean region totaled $539 million. Since 2000, IFC has provided and mobilized more than $1.3 billion in financing for the Caribbean.
SBDF is a microfinance institution established in 2001. It has so far granted more than 4,000 loans, for a total portfolio amount of over $2.8 million, which has led to an estimated 7,153 new jobs in Guyana.

By Naagesh Naaraayana

Microfinance Focus, July 28, 2009: Sending a clear message for urgency to bridge the viability gap in several models of financial inclusion,  a report by Skotch Development Foundation said though 25 million no-frill accounts were opened between April 2007 and May 2009, only 11% of them are operational.
Endorsing the findings, former RBI Governor C Rangarajan, said that the finding raises the critical question of the cost of intermediation and who should bear the cost since viability gap is there.
RBI Deputy Governor K C Chakrabarty at the outset concurred that the facts presented in the Skoch study could not be contested but said the Banking Correspondents or BC model is the most significant reform which has taken place in the banking system. “No-frills account will not give any help to a poor man if he is not economically enabled to do banking transactions,” he pointed out.
The study has analysed two types of data — one pertaining to 28 financial inclusion pilot projects and the second to a large banking correspondent (BC) project in Andhra Pradesh. It sought to determine the viability and cost-effectiveness of the BC model and identified several options it viable. However, the cost is still found unsustainable in the short to medium term for the BCs.
An analysis of costs based on what the banks are actually paying to vendors (BCs) reveals that the gap at the end of two years is between Rs 26.25 to Rs 73.45 per account.
This may result in possible folding up of some BCs, create unmanageable bottlenecks in states like Andhra Pradesh, stall financial inclusion initiatives in other states and shake the public confidence in financial inclusion goals.
The study also observed that the technology provider and the BC are basically the same organisation, forced to function under two legal entities while dealing with banks as a single entity. If the BCs are allowed to function as a unified for-profit entity, the problem of attracting funds will be ddressed, suggested the study.
Those who took part in Skotch conference in Mumbai early this month included C Rangarajan, Member, Rajya Sabha; K C Chakrabarty, Deputy Governor, RBI; S Sridhar, CMD, Central Bank; David Nishball, President, Bharti Airtel; K G Karmakar, MD, NABARD; N K Mehta, GM-FI, PNB and Hari Sankaran, MD, IL&FS.

Microfinance Focus, July 28, 2009:

Key Recommendations

The Skoch study has further recommended that financial inclusion should be declared a national priority and a National Mission on Financial Inclusion (NaMFI) be constituted to achieve universal financial access in the medium term and universal financial inclusion in the long term. The proposed mission should be entrusted with managing and disbursing the Financial Inclusion Technology Fund (FITF) and Financial Inclusion Promotion Fund (FIPF).
Recommendations have also been made to further financial literacy, meet target needs through product innovation, and leverage existing technologies among others.
To make the BC model viable, the study sought:
* To enable access to venture funding, either the 10% cap on corporate holding in a BC or the not-for profit company conditionality should be removed.
* To address the viability gap, the FIPF Fund should be utilised immediately to compensate BCs. Also, the transaction fee for NREGA and other social benefit payments should be provided for and made mandatory by the Centre.
* To make banks proactively engage the BCs in loan services, including recovery, insurance, etc. The banks could also provide long-term loans at priority sector interest rates without collateral (on the basis of projected 5-year balance sheets) to meet the working capital needs of BCs, it said.
* To widen the definition of BCs as well as broaden the BC model to incorporate other channels that are already pervasive like CSCs, mobiles, PCO operators, PRIs etc.

Microfinance Focus, July 27, 2009: India’s rural lending agency NABARD has sanctioned a Rs 307-crore loan for infrastructure projects in West Bengal.
The amount would be spent for developing infrastructure for marketing of agriculture and rural produce in the state, said NABARD in a statement in a press release on Monday.
The loan provided under the Rural Infrastructure Development Fund (RIFD) includes Rs 257 crore under RIDF XV and Rs 50 crore towards cost escalation of earlier projects.
A portion of the fund will go into development of infrastructure for marketing agriculture and rural produce as well as proper storage and sale. NABARD has sanctioned Rs 22.35 crore to develop market complexes in 9 districts including Burdwan, Cooch Behar, Darjeeling, Hooghly, Malda, Nadia, North 24 Parganas and East Midnapore, the statement said.